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Unit-1 Chain of Production

The document introduces key concepts in production including products, producers, consumers, and the different types and stages of production. It defines production as any activity that transforms goods and services to satisfy human needs and wants. There are three stages of production: primary involves extracting raw materials, secondary converts raw materials into finished goods, and tertiary provides commercial and personal services to consumers. Added value refers to the increased worth of a product after processing at each stage of production.

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0% found this document useful (0 votes)
437 views

Unit-1 Chain of Production

The document introduces key concepts in production including products, producers, consumers, and the different types and stages of production. It defines production as any activity that transforms goods and services to satisfy human needs and wants. There are three stages of production: primary involves extracting raw materials, secondary converts raw materials into finished goods, and tertiary provides commercial and personal services to consumers. Added value refers to the increased worth of a product after processing at each stage of production.

Uploaded by

CRITICAL GAMER
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INTRODUCTION TO

COMMERCE
Production

UMAR SHIHAM
Unit 1-Production
The Chain of Production-Chapter 1

Terms in Production
1. Products-It is the goods and services produced by a company, to satisfy needs and
wants of customers.
2. Production – It is any activity which serves to satisfy human needs and wants.
3. Producer- It is a person or company who produces products to satisfy need and wants.
4. Consumers – They are the ultimate users of goods and services produced

What is Production?
• Production can be defined as any activity that uses goods and services to satisfy
human needs and wants
• The process of production creates products which are used to satisfy needs and wants
• Economists may describe production as the creation of utility

Creation of Utility
• Creation of utility can described as making something useful that was not as useful
Ex-Turning wool into Cloth
• There are 3 types of Utilities and they are
1. Utility of form: Any activity that changes the form of a product so that it becomes
more useful to the consumer for example conversion of wood into more useful
furniture.
2. Utility of place: Any activity that transfers the goods or services to a location which is
within easier assess to the consumer, for example transfer of goods from far off
factories to nearby retail shops.
3. Utility of time: Any activity that causes the availability of a product on time when it is
needed, for example availability of wheat throughout the year

Needs and Wants


• Needs can be defined as goods that are essential in order for human survival
Ex-………………………………………………………………………..
• Wants can be described as methods of satisfying needs or goods and services that
make people’s lives easier

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Ex………………………………………………………………………...

Types of Production
• There are 2 types of production they are
1. Direct production
2. Indirect Production

Direct Production
• When a person produces goods and services to satisfy his own needs and wants it is
known as direct production

Indirect Production
• When a person produces goods and services to satisfy others needs and wants it is
known as indirect production

Branches of Production
• There are 3 branches in Production they are
1. Primary Production
2. Secondary Production
3. Tertiary Production

Primary Production
• Primary production is the first stage of any production process
• Primary production is concerned with extracting natural resources from the earth such
as minerals , fuel or raw materials
• Occupations such as fishing , mining , farming and quarrying are considered to be
under primary production
• Once resources are extracted they are in an unusable state so they moved to the
secondary stage of production

Secondary Production
• Secondary production is the second stage of the production process
• Secondary production is concerned with converting raw material extracted from
primary production into finished goods

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• Secondary production consists of Manufacturing , Processing and Construction
• Products converted into finished goods are usable but are in the wrong location so are
moved to the third stage of production

Tertiary Production
• Tertiary production is the third and final stage of the production process
• Tertiary production is involved with the provision of services to consumers
• There are 2 types of service
1. Commercial services
2. Direct personal services

Commercial Services
• All services which are related to distribution of goods and services from producers to
customers are known as commercial service
Ex-communication, finance, insurance, retailers and wholesalers

Direct Services
• Provision of personal services directly to the consumer without anyone else involved
is known as direct services
Ex-teacher, barber and tailor are usually personal services to satisfying immaterial
wants

Added Value
• Value is added to a product when it is transformed at each stage of the production
process
• Added Value is the difference between the value of a firms output and the cost of
materials , components and services used to create it
• The finished goods are worth more than the cost of all the parts that makes the goods
• Added Value = Selling Price – Cost of production

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Additional Notes
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